Nokia and Ericsson Accelerate Cost-Cutting Plans and Revamping

BERLIN — The two largest European makers of telecommunications equipment, Nokia and Ericsson, announced plans on Thursday to continue or accelerate cost-cutting efforts in the face of rising competition, internal reorganizations and weak demand in North America.

Nokia, the largest seller of mobile phones by volume, said it planned to cut more than the 1 billion euros ($1.43 billion) it had previously planned to trim from its operating expenses by 2013. The company, based in Espoo, Finland, did not specify a new target.

It announced the new plan as it reported a loss of 368 million euros in the second quarter.

Ericsson, the largest maker of telecom networking equipment, said it took a restructuring charge of 1.3 billion Swedish kronor ($202 million) in the quarter, more than some investors had been expecting, to pay for layoffs in Sweden.

The separate announcements created heavy trading in shares of both companies in Europe.

Pete Cunningham, an analyst at Canalys in Reading, England, said Nokia’s sales decline stemmed from its difficulty selling smartphones that use its Symbian operating system in China. Nokia said in February that it planned to progressively replace Symbian with Microsoft’s Windows phone software starting later this year.

“This is obviously not good news from Nokia,” Mr. Cunningham said. “I think the appetite for Symbian devices has fallen away very quickly since Nokia made the announcement about moving to Microsoft in February. This shows they definitely need those Windows phones as soon as possible.”

Stephen Elop, the Nokia chief executive hired from Microsoft last year, said Nokia had replaced key sales executives, reduced inventories in China, revamped its handset-pricing strategy and refocused its retail marketing programs to compensate for the downturn.

“The challenges we are facing during our strategic transformation manifested in a greater than expected way in Q2 2011,” Mr. Elop said in a statement. “However, even within the quarter, I believe our actions to mitigate the impact of these challenges have started to have a positive impact on the underlying health of our business.”

Mr. Elop, in a conference call with analysts, reiterated that Nokia planned to sequentially introduce the first Microsoft devices later this year in various national markets. He did not say how many devices Nokia would introduce, or in which markets.

Nokia’s sales fell in all regions of the world except the Middle East and Africa during the quarter. The greatest percentage decline was in North America, where sales fell 61 percent, to 88 million from 223 million a year earlier.

Ericsson shares fell even as the company, which faces competition from the Chinese companies Huawei and ZTE and its French rival Alcatel-Lucent, reported a 59 percent increase in second-quarter profit, to 3.2 billion kronor from 2 billion kronor a year earlier.

During an interview, Hans Vestberg, Ericsson’s chief executive, said the company’s restructuring charge in the second quarter had been greater than expected but was part of the current adjustment of its global business to meet the economic conditions.

“If you look at our numbers today, this is one of the strongest quarters of growth we’ve ever had,” Mr. Vestberg said. “We had a higher restructuring cost than expected but we did that to improve the profitability of the company going forward.”

Mr. Vestberg said demand for mobile networking equipment remained strong globally during the quarter, especially in Russia, China, Brazil and India. Sales rose by 70 percent in Russia, 96 percent in China, 17 percent in Brazil and 107 percent in India, as operators built high-speed mobile broadband networks for growing populations.

Sales of networking equipment in North America fell 6 percent in the quarter, which Mr. Vestberg attributed to the appreciation of the Swedish currency against the dollar. Mr. Vestberg said Ericsson planned to report about $300 million in restructuring charges this year.

With the announcement on Thursday, the company was two-thirds of the way to its goal, he said.

A version of this article appears in print on July 22, 2011, on page B8 of the New York edition with the headline: Nokia and Ericsson Accelerate Cost-Cutting Plans and Revamping. Order Reprints|Today's Paper|Subscribe